Seminar – Fiscal Space: What Have We Learnt Since the Crises?

Professor Jagjit Chadha, National Institute of Economic and Social Research

Jagjit Chadha will talk on the traditional approach to fiscal policy, which involves respecting the simple notion of debt sustainability. This over-riding concern has led to considerable weight being placed on cutting public expenditure following a ballooning in public debt after the great financial crisis. The research has also formulated a sequence of fiscal rules and around the world observe that Councils have been developed to support the credibility of fiscal policy under uncertainty. But have we done the right thing? Jagjit will consider a number of possible extensions to the standard response of seeking to reduce debt and limiting taxation. First, he shall examine how episodes of high public debt are successfully reversed? Secondly, it shall be considered what links between monetary and fiscal policy that are overlooked, in particular by drawing on the experience of QE. Thirdly, how are the prescriptions for monetary and fiscal policy affected by market incompleteness? And finally, what role does the debt management of maturity and debt instruments play setting fiscal policy? Jagjit will illustrate with examples from the past and from the recent crisis in the Euro Area and suggest that current settlement of tight monetary-fiscal policy may be responsible for the economic trap of low growth.

Speaker bio

Jagjit Chadha is Director of the National Institute of Economic and Social Research. He is on a full-time absence of leave as Professor of Economics at the University of Kent and was a part-time Professor of economics at Cambridge. He was previously Professor of Economics at the University of St Andrews and Fellow at Clare College, University of Cambridge. He has worked at the Bank of England as an Official working on Monetary Policy and as Chief Quantitative Economist at BNP Paribas. He has acted as Specialist Adviser to the House of Commons Treasury Committee and academic adviser to both the Bank of England and HM Treasury. He sits on the Research Committee of the Economics and Social Research Council and on the REF2020 panel. His main research interests are developing the links between finance and macroeconomics in general equilibrium models and he has published widely in economics journals. He has just completed a British Academy Grant to study fiscal data in the 19th Century.

This seminar is organised in association with the Cambridge Political Economy Society and held at St Catharine’s College.